COVER STORY: CLIMATE CHANGE: An appeal to reason: the economics and politics of climate change

by Lord Nigel Lawson

News Weekly, November 25, 2006

Following release of the Stern Report which foreshadowed a range of new taxes to deal with what were said to be the inevitable effects of climate change, a former British Chancellor of the Exchequer, Lord Nigel Lawson, gave a lecture challenging alarmist predictions about climate change, and calling for governments to adopt sensible policies.

Lord Lawson

This is a highly complex subject, involving as it does science, economics and politics in almost equal measure. The Centre for Policy Studies has kindly agreed to publish a greatly extended version of this lecture as a pamphlet, in which I will be able to do greater justice to that complexity and to quote the sources of a number of the statements I propose to make. It will also enable me to deal at slightly greater length with the scare-mongering Stern Report, published recently.

First, a very brief comment on Sir Nicholas Stern. If scaremongering seems a trifle harsh, I should point out that, as a good civil servant, he was simply doing his masters' bidding.

In fact, the voluminous Stern Report adds disappointingly little to what was already the conventional wisdom - apart from a battery of essentially spurious statistics based on theoretical models and conjectural worst cases. This is clearly no basis for policy decisions which could have the most profound adverse effect on people's lives, and at a cost which Stern almost certainly underestimates.

So let us get back to basics, and seek the answers to three questions, of increasing complexity. First, is global warming occurring? Second, if so, why? And third, what should be done about it?

As to the first question, there is of course little doubt that the 20th century ended warmer than it began. According to the Hadley Centre for Climate Prediction and Research, an offshoot of Britain's Met Office: "Although there is considerable year-to-year variability in annual-mean global temperature, an upward trend can be clearly seen; firstly over the period from about 1920-1940, with little change or a small cooling from 1940-1975, followed by a sustained rise over the last three decades since then."

Apart from the trend, there is of course the matter of the absolute numbers. The Hadley Centre graph shows that, for the first phase, from 1920 to 1940, the increase was 0.4 degrees centigrade. From 1940 to 1975 there was a cooling of about 0.2 degrees. (It was during this phase that alarmist articles by Professor James Lovelock and a number of other scientists appeared, warning of the onset of a new ice age.) Finally, since 1975 there has been a further warming of about 0.5 degrees, making a total increase of some 0.7 degrees over the 20th century as a whole (from 1900 to 1920 there was no change).

Why, then, has this modest - if somewhat intermittent - degree of global warming occurred? Why has this happened, and what does it portend for the future? The only honest answer is that we don't know.

The conventional wisdom is that the principal reason why it has happened is the greatly increased amount of CO2 in the atmosphere as a result of the rapid worldwide growth of carbon-based energy consumption.

Now, there is no doubt that atmospheric concentrations of CO2 increased greatly during the 20th century - by some 30 per cent - and most scientists believe this increase to be largely man-made. And CO2 is one of a number of so-called greenhouse gases whose combined effect in the earth's atmosphere is to keep the planet warmer than it would otherwise be.

Far and away the most important of these gases is water vapour, both in its gaseous form and suspended in clouds. Rather a long way back, CO2 is the second most important greenhouse gas - and neither, incidentally, is a form of pollution.

It is the published view of the Met Office that is it likely that more than half the warming of recent decades (say 0.3 degrees centigrade out of the overall 0.5 degrees increase between 1975 and 2000) is attributable to man-made sources of greenhouse gases - principally, although by no means exclusively, CO2.

Scientists differ

But this is highly uncertain, and reputable climate scientists differ sharply over the subject. It is simply not true to say that the science is settled; and the recent attempt of the Royal Society, of all bodies, to prevent the funding of climate scientists who do not share its alarmist view of the matter is truly shocking. The uncertainty derives from a number of sources. For one thing, the science of clouds, which is clearly critical, is one of the least well understood aspects of climate science.

Another uncertainty concerns the extent to which urbanisation (not least in the vicinity of climate stations) has contributed to the observed warming. There is no dispute that urbanisation raises near-surface temperatures: this has long been observed from satellite infra-red imagery. The uncertainty is over how much of the estimated 20th century warming this accounts for.

Yet another uncertainty derives from the fact that, while the growth in man-made carbon dioxide (CO2) emissions, and thus CO2 concentrations in the atmosphere, continued relentlessly during the 20th century, the global mean surface temperature, as I have already remarked, increased in fits and starts, for which there us no adequate explanation.

But then - and this is the other great source of uncertainty - the earth's climate has always been subject to natural variation, wholly unrelated to man's activities. Climate scientists differ about the causes of this, although most agree that variations in solar radiation play a key part.

It is well established, for example, from historical accounts, that a thousand years ago, well before the onset of industrialisation, there was - at least in Europe - what has become known as the mediaeval warm period, when temperatures were probably at least as high as, if not higher than, they are today.

Going back even further, during the Roman empire, it may have been even warmer. There is archaeological evidence that in Roman Britain, vineyards existed on a commercial scale at least as far north as Northamptonshire.

More recently, during the 17th and early 18th centuries, there was what has become known as the little ice age, when the Thames was regularly frozen over in winter, and substantial ice fairs held on the frozen river - immortalised in colourful prints produced at the time - became a popular attraction.

Historical treeline studies, showing how far up mountains trees are able to grow at different times, which is clearly correlated with climate change, confirm that these variations occurred outside Europe as well.

Glaciers advancing

But it is not only over time that the earth's climate displays considerable natural variability. Change also varies geographically. For example, there are parts of the world where glaciers are retreating, and others where glaciers are advancing. The fringes of the Greenland ice shelf appear to be melting, while at the centre of the shelf the ice is thickening. Curiously enough, there are places where sea levels are perceptibly rising, while elsewhere they are static or even falling - suggesting that local factors still dominate any global warming effects on sea levels.

Again, extreme weather events, such as major storms in the Gulf of Mexico, have come and gone, at irregular intervals, for as long as records exist. Katrina, which caused so much damage to New Orleans, is regularly trotted out as a consequence of man-made climate change; yet the region's worst recorded hurricane was that which devastated Galveston in 1900.

Following Katrina, the world's authorities on tropical storms set up an international panel, which included the relevant expert from the Met Office here in the UK. The panel reported, earlier this year, as follows: "The main conclusion we came to was that none of these high-impact tropical cyclones could be specifically attributed to global warming."

This may not be all that surprising, given how little global warming has so far occurred; but I do not recall it featuring in Mr Gore's film.

But this diversity makes it all too easy for the Al Gores of this world to select local phenomena which best illustrate their predetermined alarmist global narrative. We need to stick firmly to the central point: what has been the rise in global mean temperatures over the past 100 years, why we believe this has occurred, how much temperatures are likely to rise over the next 100 years or so, and what the consequences are likely to be.

As is already clear, the only honest answer is that we do not know. It is important to bear in mind that, whatever climate alarmists like to make out, what we are confronted with, even on the Hadley Centre/Intergovernmental Panel on Climate Change (IPCC) hypothesis, is the probability of very gradual change over a large number of years. And this is something to which it is eminently practicable to adapt.

This points to the first and most important part of the answer to the question of what we should do about the threat of global warming: adapt to it. There are at least three reasons why adaptation is far and away the most cost-effective approach.

The first is that many of the feared harmful consequences of climate change, such as coastal flooding in low-lying areas, are not new problems, but simply the exacerbation of existing ones; so that addressing these will bring benefits even if there is no further global warming at all.

The second reason is that, unlike curbing CO2 emissions, this approach will bring benefits whatever the cause of the warming, whether man-made or natural.

And the third reason why adaptation - most of which, incidentally, will happen naturally, that is to say it will be market-driven, without much need for government intervention - is the most cost-effective approach is that all serious studies show that, not surprisingly, there are benefits as well as costs from global warming. Adaptation enables us to pocket the benefits while diminishing the costs.

Coastal flooding

According to the IPCC, the greatest single threat posed by global warming is coastal flooding as sea levels rise. Sea levels have, in fact, been rising very gradually throughout the past 100 years, and even the last IPCC Report found little sign of any acceleration. Nevertheless, Sir Nicholas Stern, charged by the Government to look into the economics of climate change, is particularly concerned about this, especially the alleged melting of the Greenland ice sheet.

He has written that: "The net effect of these changes is a release of 20 billion tonnes of water to the oceans each year, contributing around 0.05 millimetres a year to sea-level rise."

This would imply an additional sea-level rise of less than a quarter of an inch per century, something it ought not to be too difficult to live with.

But the major source of projected sea-level rise is from ocean warming expanding the volume of water. As a result, some of those low-lying areas already subject to serious flooding could find things getting significantly worse, and there is a clear case for government money to be spent on improving sea defences in these areas. The Dutch, after all, have been doing this very effectively for the past 500 years.

The governments of the richer countries, like the United States with its Gulf coast exposure, can be left to do it for themselves; but in the case of the poorer countries, such as Bangladesh, there is a powerful argument for international assistance.

Bizarre

The argument that we need to cut back substantially on CO2 emissions in order to help the world's poor is bizarre in the extreme. To the extent that their problems are climatic, these problems are not new ones, even if they may be exacerbated if current projections are correct.

If, 20 years ago, when as Chancellor I was launching the first concerted poor-country debt forgiveness initiative, subsequently known as the Toronto terms, anyone had argued that the best way to help the developing countries was to make the world a colder place, I would probably have politely suggested that they see their doctor. It makes no more sense today than it would have done then.

But it is clear that the cost will be large enough, among other consequences, to diminish significantly the export markets on which the future prosperity of the developing countries at least in part depends. So far from helping the world's poor, it is more likely to harm them.

Nevertheless, curbing CO2 emissions, along the lines of the Kyoto accord, under which the industrialised countries of the world agreed to somewhat arbitrarily assigned limits to their CO2 emissions by 2012, remains the conventional answer to the challenge of global warming. It is hard to imagine a more absurd response.

Even its strongest advocates admit that, even if fully implemented (which it is now clear it will not be, and there is no enforcement mechanism), the existing Kyoto agreement, which came into force last year, would do virtually nothing to reduce future rates of global warming.

Its importance, in their eyes, is as the first step towards further such agreements of a considerably more restrictive nature. But this is wholly unrealistic, and fundamentally flawed for a number of reasons. In the first place, the United States, the largest source of CO2 emissions, has refused to ratify the treaty and has made clear its intention of having no part in any future such agreements.

The principal American objection is that the developing countries - including such major contributors to future CO2 emissions as China, India and Brazil - are effectively outside the process and determined to remain so. Indeed, both China and India currently subsidise carbon-based energy.

The developing countries' argument is a simple one. They contend that the industrialised countries of the Western world achieved their prosperity on the basis of cheap carbon-based energy; and that it is now the turn of the poor developing countries to emulate them. And they add that if there is a problem now of excessive CO2 concentrations in the earth's atmosphere, it is the responsibility of those that caused it to remedy it. Nor are they unaware of the uncertainty of the science on the basis of which they are being asked to slow down their people's escape from grinding poverty.

The consequences of the exclusion of the major developing countries from the process are immense.

China alone last year embarked on a program of building 562 large coal-fired power stations by 2012 - that is, a new coal-fired power station every five days for seven years. Putting it another way, China is adding the equivalent of Britain's entire power-generating capacity each year. Since coal-fired power stations emit roughly twice as much CO2 per gigawatt of electricity as gas-fired ones, it is not surprising that it is generally accepted that within the next 20 years China will overtake the United States as the largest source of emissions. India, which like China has substantial indigenous coal reserves, is set to follow a similar path, as is Brazil.

There are all sorts of things we can do, from riding a bicycle to putting a windmill on our roof, that may make us feel good. But there is no escaping the two key truths.

First, there is no way the growth in atmospheric CO2 can be arrested without a very substantial rise in the cost of carbon, presumably via the imposition of a carbon tax, which would require, at least in the short to medium term, a radical change of lifestyle in the developed world. Are we seriously prepared to do this?

And the second key truth is that, even if we were prepared to do this, it would still be useless unless the major developing nations - notably China, India and Brazil - were prepared to do the same, which they are manifestly and understandably not.

So we are driven back to the need to adapt to a warmer world, and the moral obligation of the richer countries to help the poorer countries to do so.

But inevitably we cannot be absolutely sure; and the same applies to all the other much-discussed disasters.

Precautionary principle

It is at this point that the so-called precautionary principle is invoked. Conventional cost-benefit analysis is irrelevant, it is argued. A climate catastrophe may be unlikely; but if it occurred the consequences would be so appalling that we must do whatever it takes, here and now, to prevent it. At first sight this seems a persuasive argument. But a moment's reflection shows its shortcomings as a guide to practical policy decisions.

In the first place, while the prospect of catastrophic consequences from global warming cannot be regarded as impossible, nor can a number of other possible catastrophes.

It is perfectly possible, for example, that over the next 100 years or so, the world might enter another ice age. There is ample evidence that this has happened at fairly regular intervals over the long history of the planet, and that we are overdue for another one.

More immediately - and thus demanding much more urgent attention and priority in the expenditure of resources - there are the possible consequences of nuclear proliferation to worry about, not to mention the growth in the terrorist threat in an age when scientific and technological developments have brought the means of devastation within the reach of even modestly funded terrorist groups.

The notion that if we in the UK are prepared to set an example, then the rest of the world will follow, is reminiscent of the old unilateralist CND argument that if we in the UK abandoned nuclear weapons, then the Soviet Union and the United States would follow suit, and just as far-fetched.

Today we are very conscious of the threat we face from the supreme intolerance of Islamic fundamentalism. It could not be a worse time to abandon our own traditions of reason and tolerance, and to embrace instead the irrationality and intolerance of ecofundamentalism, where reasoned questioning of its mantras is regarded as a form of blasphemy. There is no greater threat to the people of this planet than the retreat from reason we see all around us today.

- Lord Nigel Lawson was a long-serving Chancellor of the Exchequer (1983-1989) in Margaret Thatcher's Conservative Government. This article is an abbreviated version of Lord Lawson's address to the Centre for Policy Studies on November 1, 2006. The full text is available at: www.cps.org.uk/latestlectures